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CANADA FX DEBT-Canadian dollar edges higher as China jitters ease

    * Canadian dollar strengthens 0.1% against greenback
    * Canadian factory sales likely up 0.5% in August
    * Price of U.S. oil increases 1.3%
    * Canadian bond yields little changed

    TORONTO, Sept 22 (Reuters) - The Canadian dollar rose
against the greenback on Wednesday as worries about the
potential collapse of property developer China Evergrande
receded and domestic data showed that factory sales likely rose
in August, but gains were capped ahead of the release of the
Federal Reserve's latest policy statement.
    Shares globally          gained ground as China Evergrande
struck a deal to pay a coupon on one of its domestic bonds.
Worries over a possible default by China's No. 2 property
developer have weighed on financial markets in recent days.
    Canada is a major exporter of commodities, including oil, so
the loonie tends to be sensitive to investor appetite for risk.
    Oil prices increased after industry data showed U.S. crude
stocks fell more than expected last week in the wake of two
hurricanes, highlighting tight supply as demand improves.
                
    U.S. crude futures        were up 1.3% at $71.41 a barrel,
while the Canadian dollar gained 0.1% to 1.2805 per greenback,
or 78.16 U.S. cents.
    The Canadian currency has recovered from the one-month low
of 1.2895 hit on Monday, helped by the removal of uncertainty
over the outcome of the Sept. 20 federal election.
    Prime Minister Justin Trudeau's Liberals fell short of
winning a majority in the election, leaving his government once
again dependent on opposition legislators to pass legislation.
            
    Canadian factory sales rose 0.5% in August, driven by higher
sales of petroleum and coal products, chemical and primary metal
industries, a flash estimate from Statistics Canada showed.
            
    The Fed is due to release its latest policy statement and
economic projections at 2 p.m. EDT (1800 GMT). It is expected to
clear the way for reductions to its monthly asset purchases
later this year.             
    Canadian government bond yields were little changed across
the curve, with the 10-year             dipping less than half a
basis point to 1.225%.

 (Reporting by Fergal Smith
Editing by Paul Simao)
  
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